What is DeepSeek and why has it caused tech stocks to drop?
Published On Jan 27, 2025, 2:07 PM
DeepSeek, a Chinese AI-powered chatbot, has rapidly become the most downloaded free app on Apple's App Store since its U.S. launch in January 2023. Developed with significantly lower costs than U.S. counterparts, such as ChatGPT, DeepSeek's rapid adoption has raised concerns in financial markets, particularly affecting companies like Nvidia. Nvidia experienced a historic loss of nearly $600 billion in market value, dropping 17% in a single day. The success of DeepSeek challenges the notion that only high-budget, sophisticated technology can lead in AI advancement, potentially impacting the future demand for high-performance chips.
Stock Forecasts
NVDA
Negative
DeepSeek’s rise indicates competitive pressure on companies like Nvidia, suggesting a shift in market dynamics where cost-effectiveness could challenge traditional high-cost AI solutions. As DeepSeek leverages less advanced, more readily available chips, it poses a risk to Nvidia’s dominance in the AI chip market, leading to decreased demand and revenues for established players.
KWEB
Positive
Given the increasing popularity of AI-powered applications and the growing acceptance of alternative technologies, there may be potential for investment in lower-cost AI firms that could emerge as competitors to larger entities like DeepSeek, but long-term sustainability is still uncertain.
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